When a bank devotes significant time and energy developing business and leadership strategies to build its enterprise value, it makes sense to design and leverage a supporting executive pay program.
However, aligning strategy with compensation in an effective way may require straying from the normal practice. The lure of a one-size-fits-all program that offers consistency among industry peers can often work to undermine a growth strategy.
This article looks at five plan components for a bank’s Compensation Committee to consider as they develop true strategy-driven compensation programs.
- Mix of fixed and variable pay
- Time horizon
- Long-term incentive vehicle selection
- Incentive plan metrics
- Communication and messaging
